PYMORT: Longevity-Bond Pricing Engine
Overview
Develop a sophisticated longevity-bond pricing engine that models mortality risk and prices longevity-linked securities. This project combines actuarial science with advanced financial mathematics.
What You’ll Build
A comprehensive pricing engine that:
- Models mortality rates and longevity trends
- Prices longevity bonds and derivatives
- Implements stochastic mortality models
- Provides risk analysis and scenario testing
Key Learning Objectives
- Mortality Modeling: Understand demographic and actuarial concepts
- Financial Mathematics: Apply advanced pricing methodologies
- Stochastic Processes: Implement time-series models for mortality
- Risk Management: Quantify and analyze longevity risk
Core Features to Implement
Mortality Models
- Lee-Carter mortality model
- Cairns-Blake-Dowd model extensions
- Stochastic mortality projections
- Cohort effect modeling
Pricing Engine
- Longevity bond valuation
- Survivor swap pricing
- Mortality derivative instruments
- Risk-neutral measure calibration
Analysis Tools
- Scenario analysis and stress testing
- Sensitivity analysis to model parameters
- Risk metrics and hedging strategies
- Visualization of mortality surfaces
Technical Challenges
- Model Calibration: Fit complex stochastic models to historical data
- Numerical Methods: Implement advanced mathematical algorithms
- Data Quality: Handle incomplete and noisy mortality data
- Performance: Optimize computationally intensive calculations
Domain Knowledge Required
- Basic understanding of mortality and life tables
- Financial mathematics and bond pricing concepts
- Stochastic processes and time series analysis
- Statistical modeling experience helpful
Assessment Focus
- Mathematical Rigor: Correct implementation of complex models
- Model Validation: Proper testing against known results
- Innovation: Creative approaches to longevity modeling
- Practical Application: Tools useful for practitioners
Getting Started
- Study mortality modeling fundamentals and literature
- Review longevity bond structures and market examples
- Explore the template for mathematical framework
- Understand demographic data sources and formats
Resources
- Actuarial science textbooks on mortality
- Academic papers on longevity bond pricing
- Mortality databases (HMD, HFD)
- Financial mathematics references
Tackle one of the most challenging problems in actuarial finance with this cutting-edge project.